From Climate Risk to Public Value: Rethinking Policy Appraisal in a Changing World

Dr. Ida Kubiszewski

Climate change is no longer a future concern. It is a present, pervasive force reshaping the social, ecological, and economic systems on which societies depend. In April 2025, HM Treasury issued updated guidance - Accounting for the effects of climate change - that formally integrates this reality into the UK’s policy and investment appraisal framework. This represents a shift in that government departments and agencies must now assess how a changing climate alters the expected costs, benefits, and performance of public interventions.

This shift is not merely technical. It reflects a recognition that public decision-making must move beyond assumptions of environmental stability. The impacts of climate change - sea-level rise, extreme heat, biodiversity loss, and water scarcity - must be factored directly into how we evaluate value, risk, and success.

A Step Change in Policy Appraisal

The Green Book has long served as the UK’s central guide for evaluating public spending decisions. Its 2025 update explicitly calls for decision-makers to assess climate risks across the full lifecycle of a proposal, using scenario-based methods grounded in the latest scientific evidence.

Crucially, the guidance rejects default reliance on historical trends. Instead, it requires that appraisals test how proposals would perform under multiple future climate scenarios, including those involving physical system disruption and cascading ecological feedbacks. This shift toward dynamic and systemic appraisal reflects the growing recognition that climate change does not alter conditions at the margins but reshapes baseline assumptions.

The implications are profound. Projects that appear cost-effective under static models may prove unsustainable when future climate impacts are accounted for. On the other hand, interventions that build long-term resilience - ecosystem restoration, distributed infrastructure, adaptive social services - may offer greater public value than traditional benefit–cost metrics can capture.

Climate Change as a Core Risk Variable

The updated guidance positions climate change as a fundamental risk that intersects with multiple sectors and policy domains. This includes:

• Physical infrastructure (flooding, overheating, asset degradation)

• Public health (exposure to heatwaves, vector-borne diseases)

• Natural capital and biodiversity (ecosystem collapse, loss of pollination or water regulation)

• Economic stability (supply chain disruption, resource scarcity)

By embedding climate into cost–benefit analysis, departments are encouraged to take a more integrated approach to risk management, one that accounts for interdependencies between environmental, social, and economic systems.

While the Accounting for the effects of climate change report does not prescribe specific methods, it recommends best practice tools, including systems thinking, scenario planning and testing, and value-at-risk analysis. Importantly, it highlights the need to include non-market goods in appraisal, particularly those related to ecosystems, wellbeing, prosperity, and public health, areas that are often underrepresented in conventional models.

Toward a More Coherent Policy Logic

The Treasury’s report reflects a broader international trend, a shift from short-term, siloed policymaking toward integrated, long-horizon strategies that better align with climate science. This approach also resonates with growing academic interest in systems-based governance and the need for public institutions to build adaptive capacity in the face of deep uncertainty.

UCL’s Institute for Global Prosperity is active in this space, developing tools and frameworks to support integrated policy design. Its MSc in Prosperity, People and Planet offers students the conceptual and analytical tools to understand these systems interactions, bridging climate science, economics, governance, and public value.

Programmes like this support a growing need in government and civil society for people trained to think across silos, model dynamic risks, and integrate social and ecological factors into public planning.

Planning for the World Ahead

The 2025 Green Book update is a necessary response to the accelerating climate crisis. By requiring public investments to be appraised through a climate-informed lens, it brings policy logic closer to environmental reality.

However, implementing this shift at scale will require more than new guidance. It demands new capabilities within public institutions, better data and tools, and a workforce equipped to think systemically.

Integrating climate change into public frameworks is not only a matter of avoiding failure, it is essential for designing policy that is credible, resilient, and relevant in a climate-shaped future.